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Friday, July 30, 2010

This article will attempt to describe commercial real estate market prices and CMBS issuance from 2001 through 2009, construct an outlook for the coming months, and end with a couple of ETFs/funds that investors can use to gain exposure to the CRE market.

We should first note that the price index being used here is the Moody's/REAL Commercial Property Index.The index "is a periodic same-property round-trip investment price change index of the U.S. commercial investment property market based on data from MIT Center for Real Estate industry partner Real Capital Analytics, Inc (RCA)."An easing of underlying demand for commercial real estate reflects the drop-off in CMBS issuance.Associated with the lessened demand for commercial real estate is the decline in prices.The graph below depicts the yearly CPPI and total CMBS issuance dating back to 2001.

Now this picture may look bleak considering that prices dropped about 39% to their current levels, after reaching their peak in late October 2007.However, there have been glimmers of hope in 2010.Prices are up 3.20% since the beginning of the year and have recently increased in 2 straight months, April and May.The most recent increase of 3.64% in May was the fourth largest month over month increase dating back to 2001, when the index was first created.According to Bloomberg, in 2010 there has been a total of $23.47 billion in CMBS issued, which is up almost 60% from the comparable 7-month time frame from 2009.The table below displays the current figures.

Earlier in the week, there was more news that showed the CMBS market is starting to recover; Goldman Sachs and Citigroup have said they plan to sell $788.5 million in commercial mortgage debt.As demand in the lowly commercial real estate market increases, we could continue to see a boost in the issuance of CMBS.

Now that we have presented a case for the recovery of CRE market, its time to look at a few solid investments that have exposure to this particular sector of the market.

We will begin with MAA, Mid-America Apartment.This is a REIT "that focuses on acquiring, owning and operating apartment communities in the Sunbelt region of the United States."This particular REIT is up almost 18% YTD while the lowly S&P is about even, at the time of this writing.The graph below shows how MAA has had no problem blowing through its 50, 100, and 200-Day moving averages.

A second investment that has a friendly amount of exposure is FIO, which is the Ishares Industrial/Office Capped Index Fund, which tracks the FTSE NAREIT Industrial/Office Capped Index.Making up 17.37% of the fund is Boston Properties Inc, which owns and manages office buildings mostly in Boston, NY, D.C, and NY.There is also some international coverage in this fund, which comes from 8.3% weight of Prologis.

A third solid investment is Proshares Ultra Real estate fund, URE.This fund "seeks daily investment results, before fees and expenses, which correspond to twice the daily performance of the Dow Jones U.S. Real Estate index. The fund invests in equity securities and derivatives that advisors believes, in combination, should have similar daily performance characteristics as twice (200%) the daily return of the index."I do understand this particular investment follows the Dow Jones Real Estate index, which incorporates other sorts of real estate, not just commercial real estate.URE pays a nice dividend, and was recently split 1:5.The fund is up almost 24% YTD. It should also be noted that different strategies and careful monitoring is required for this double leveraged ETF, so take caution.

All in all, we expect CRE prices to remain choppy near term, but they will begin to rise in the coming months.As the economy gains strength and employment improves, these offices will begin to fill up again and purchases of commercial space will also increase.This will in turn help to increase prices, as demand rises, and drive the overall economic recovery forward.By getting in on these funds early, one can certainly expect to gain from the coming increased demand in the CRE market.

Tuesday, July 27, 2010

With the recent BP spill devastating oil company's stock prices around the globe, where does one look for a solid oil investment?With much debate about regulation on the horizon, these are tough waters to navigate in terms of finding a solid investment.Well folks look no further.Her name is Atwood Oceanics.I will attempt to break her down by using some simple analysis to generate a future outlook while explaining ATW's strong growth prospects.

We will begin with a simple screener I created, sorted by market cap.Although Atwood is one of the smaller companies out there, she trades at around $27-$28, with a 52-week high of $40.58 reached in April.But lets start out with something I think is very important, the long term debt to equity ratio.As you can see here, ATW’s is way below the average of 26 “Bloomberg Peers” I used in my study.With less debt in the future, the company will naturally be more profitable. It should also be noted that I understand having debt as a means of financing is one way a company can expand, however it seems ATW has theirs in check.ATW’s earnings per share is 3.91, also above the average surveyed here.

Looking at graph of the price along with a few simple moving averages, we are able to see the ATW had no problem blowing through the 50-day SMA last week.The next test will come at the 100-day MA, at around $31.The stock was last trading at this price in early-mid May.I don’t think it will have a problem breaking through the 100-Day, which would be an 14% increase (from the time of this writing).With the 200-day MA at over $33 a share, there is clearly room to the upside.This stock is trading extremely cheap and would be a steal at anything below $28.

ATW reports earnings on August 4.They have beaten 10 of the last 12 estimates.Last quarter, they destroyed earnings coming in $1.02 vs estimates of $0.938 and the price jumped over 4%.Estimates from the period ending June 2010 expect ATW to report earnings at $0.977 a share.

Looking at their contracts and in turn their growth prospects, we can see from the map below they have 9 of their 11 rigs scattered all over the globe.Last Monday it was reported that one of their rigs, the Vicksburg, would be granted a 9-month contract extension through June 30, 2011 at a dayrate of $90,000.A month back, ATW announced that the Beacon, another beautiful rig, would be contracted in work offshore in Suriname and Guyana for a minimum of 210 days at a dayrate of $115,000.The current rig in the Gulf, the Richmond, is scheduled to being work in late July as it finishes up inspection.

Last week, Atwood appointed Mark Mey as the new VP and CFO.His new position will be effective August 11.Mr. Mey currently has experience in the offshore industry, having served on the board of Scorpion Offshore.

All in all, it is clear to see how Atwood Oceanics is growing consistently and has a strong and profitable future ahead.They have a solid business model and are striving toward the future with a bright new look to their company, by shaking up management (I do recognize this may sometimes be perceived as a negative aspect, but with a solid businessman in Mark Mey, a negative reaction is highly unlikely). These new contracts that have been acquired, including Mr. Mey, all add up to a solid investment.

Thursday, July 22, 2010

This article attempts to explain the 3-month Euro-Libor and Euribor rates and their recent steady increases, which is due to a strain European inter-bank lending market. The 3-month Euro-Libor and Euribor rates are what banks say they would pay for a short-term deposit in Euros. In terms of calculating each rate, the British Bankers Association takes out the top 4 and bottom 4 from the 16-bank survey, and then takes the average of the remaining 8 banks to come up with the Euro-Libor. The European Banking Federation takes out the top and bottom 15% of the 42 banks surveyed and averages the rest to come up with the Euribor rate.

Recently the 3-month Euro-Libor rate compiled by the British Bankers Association has increased. Monday's rate of 80.81 bps was 1.81% higher than Friday's rate. These are the highest Euro-Libor rates since the end of August 2009. The same can be said for the 3-month Euribor, which has risen each day since April 21. These steadily increasing rates continue to show stress in the European inter-bank lending market.

Since the end of May, dollar Libor rates have drifted lower. It is possible that credit strains were being over exaggerated by market participants and that banks are willing to take a little more risk in lending dollars. However, it should also be noted that these rates have only drifted slightly lower and have not in any way, dropped significantly. The graph below depicts the movement of both the 3-month dollar and Euro Libor rates.

There has been almost a 40% in the Euribor rate since the end of March, signaling the bank strains.

Thursday morning, there were reports that 2 large Irish banks had passed the tests. This came with a grain of salt as it was also reported that assets were sold to raise cash to improve the banks Tier 1 capital ratio. Tier 1 ratio is the ratio of equity capital to ones assets. The stress tests will attempt to shed some light on how capitalized banks are by testing their Tier 1 capital ratio, how they would hold up in a faltering economy, and against a sovereign default. The following chart shows a stress test ran against 19 US banks.

Friday, the EU Commission will release the results of the stress tests on 91 banks in the European Union. There have been various reports that some of the banks have not made out favorably. These reports have sent inter-bank lending rates higher. As the perceived risk of the loan rises, so does the rate of interest charged for the loan. Another possible reason for this recent spike in Euro lending rates may have come at the expense of the ECB.A recent report describing banks taking less credit than expected from the central bank may have reduced liquidity enough in the markets to push rates higher.

However, if the stress tests were to come back favorable, showing many banks are well capitalized and prepared to handle these different economic shocks, we could see rates move lower.

So where I am looking to put money? In small Irish banks. Their recent sovereign downgrades to Aa2 on Monday have left share prices relatively cheap. For this we look to The Bank of Ireland, IRE, and Allied Irish (AIB) as solid short term investments.

Sunday, July 18, 2010

The purpose of this piece is to take a look at the middle class restaurant industry as a whole and use an entertaining analogy to offer a way of comparing different companies within the sector. I have developed a list of 22 companies that fall into this category throwing out some for various reasons; i.e. Ark Restaurants (ARKR) for being to upscale and Krispy Kreme (KKD) for having a negative price to earnings ratio. This industry has been broken into sub-categories including breakfast, fast order pizza, traditional restaurants, fast food burger joints, fast food restaurant hybrids, coffee places, and YUM! because of their diversification. I have also come up with some interesting inserts for the railroads and the utilties spaces; jail, income and luxury taxes, and free parking have been omitted/left unchanged. The well known secret here is that McDonald’s (MCD) dominates the industry, and the world, with a market cap of $75 billion that exceeds the other 21 companies put together. They also pay a stable, growing dividend and have strong earnings growth to boot. For this reason they have been given the Boardwalk spot and four hotels, thus beginning our analogy. Like Monopoly, companies may have 1-4 motels, in green, or 1-4 hotels, in red, and having one hotel is bettering than having four motels. It should also be noted that these all data is up to date as of 7/18/10, and was taken from Yahoo Finance and DailyFinance.com, and that some companys’ spots on the board have been assigned so that they are next to their sub-category competitors, this will become clearer as we go on.

Breakfast Restaurants

Denny’s Corp DENN – Denny’s kicks off the board in the Mediterranean slot with a price of $2.54, a market capitalization (MC) of $0.252 billion and a price to earnings ratio (P/E) of 6.02. Their 5 year earnings growth rate is the worst on the list with the exception of Wendy’s/Arby’s, but their 2009 and expected 2010 earnings are much better than the 3 years prior. Not many analysts follow Denny’s but they have a buy consenus with price targets anywhere from $3.50 to $8, and their low P/E makes them very appealing given that the oncoming apocalypse could have consumers trading down to the low priced Grand Slams. ۩۩

Bob Evan’s Farm Inc BOBE– Baltic is taken by Bob Evan’s who has only half as many locations as Denny’s but three times the market cap. It is relatively cheap right now at a price of $24.08, a MC of $0.736 billion, and a P/E of 10.58. Their 5 year PEG rate of 1.28 has them in line with the other 21 companies and they have a dividend yield of 2.9%. Their consenus price target of $34 alludes to the fact that there is some upside opportunity.۩۩

Pizza Restaurants

California Pizza Kitchen Inc CPKI – The pizza sub-category takes the next two spaces with California Pizza Kitchen occupying Oriental. With around only 250 locations they are sort of niche; and they have a price of $14.93, a MC of $0.366 billion, and a P/E of 80.7, the second highest behind Wendy’s/Arby’s. Their EPS has been falling for 3 straight quarters, but historically their first quarter has always been their worse, so the next two should be a bit better. Since 2005 there has not really been any growth in earnings and it seems that they may be content with where they are as a company. Their 12 month target is around $20, so there is some upside but there are better plays to be made. ۩

Domino’s Pizza Inc DPZ – Domino’s (Vermont Avenue) is a very different restaurant than California Pizza Kitchen but they serve the same kind of food, especially considering all of Domino’s new specialty offerings. They revenue streams are based on delivery orders, which differentiates them from CPKI, and with around 9,000 stores across the world they are the #2 pizza supplier to Yum!’s Pizza Hut. Their current price is $12.16, with a MC of $0.718 billion, and a P/E of 8.82; this is only half that of Yum!’s, but they do not pay a dividend, which could be one of the reasons for this difference. Domino’s quarter one EPS looks very good YoY but their 5 year growth rate is bleak. To fight this Domino’s has been franchising to new global markets such as India in hopes of future growth abroad. ۩

Traditional Restaurants

Red Robin Gourmet Burgers Inc RRGB – Connecticut, the last light blue space, kicks off the traditional restaurant category with Red Robin, a sit down American cuisine style restaurant. Red Robin is currently priced at $20.44, a MC of $0.318 billion, the lowest in this sub-category, and has a P/E of 16.99. Like California Pizza Kitchen, their EPS has not done much in the last 5 years and the quarter one YoY was unspectacular to say the least. ۩

Ruby Tuesday Inc RT – Side two of the board begins with Ruby Tuesday as St. Charles. In the short term they do look much better than Red Robin and are currently trading at an inexpensive price at $9.01. Their MC is $0.57 billion and they have a P/E of 13.61. In 2008 Ruby Tuesday saw their annual EPS drop to one third of its value over the last three years, and are a great example of the actual impact of the recession. They were able to rebound nicely off of their historically terrible fourth quarter, but there is really no promise right now that they will be able to get back to their 2007 highs. The analysts feel this way as well with a hold rating and a price target of $12. ۩

Buffalo Wild Wings Inc BWLD – One the biggest growers over the last 5 years takes States Avenue. Despite a hefty set back in April and May at the hands of some guidance that did not meet the markets desires, Buffalo Wild Wings still offers some promise. Currently off a recent low around $36, BWLD is at $39.96, with an ever growing MC of $0.725 billion, and a P/E of 22.24. They had a very good first quarter that drove prices up to over $50 and are now poised for a second quarter that should exceed last year but not by as much as everyone wanted. Their 2009 EPS was three times as high as in 2005 with no significant hiccups along the way. BWLD is currently sitting 25% below the consensus target price with several analysts covering them, and offer the strong prospect of future earnings growth. ۩۩۩۩

PF Chang’s China Bistro Inc PFCB – Taking Virginia Avenue is PF Chang’s China Bistro, so famous that it’s found its way to South Park, probably not by choice. With a price of $40.24, a MC of $0.931 billion, and a P/E of 24.27, PF Chang’s has seen a rise in earnings annually since 2006 but has also seen its price drop from $65 as the hype of growth prospects has calmed. They are also the second stock to pay a dividend on this list since Bob Evan’s, at 1.6%. The bad news is their poor first quarter in 2010, but they are expected to release second quarter earnings that would beat their 2009 figure. Now that some of the novelty has worn off this company’s performance would greatly benefit from an improving economy. ۩۩۩

Cracker Barrel Old Country Store Inc CBRL - As we close in on the halfway point of the board we find Cracker Barrel maintaining St. James Place. There are not many of them in America, roughly 600, but they have proven to be profitable. Their price, down 5% recently, is at $47.03, MC of $1.11 billion, P/E of 13.62, and like PF Chang’s, has a 1.6% dividend. Their earnings have not changed much over the last 5 years, and though they have released a second quarter that beat last year’s by 6 cents, there is not much promise for growth, but their dividend has increased from 13 cents a quarter in 2005 to 20 cents now. They are also rated a buy with a price target of $56 so perhaps $47 is a solid entry point if it is still available tomorrow. ۩

Cheesecake Factory Inc CAKE – One of the smallest companies in terms of market share on this list occupies Tennessee Avenue, in the Cheescake Factory which operates roughly 160 stores. Their most recent price, down 5% like Cracker Barrel, is $24.21, MC is $1.46 billion, and P/E is 28.42. Their earnings have been relatively stable since 2005 with the exception of 2008, but so far this year as been much better than last and is predicted to continue as such for the next two releases. They have a hold rating, a target price of 29%, and do not pay a dividend. ۩۩

Brinker International Inc EAT – New York Avenue is taken by Brinker International Inc, which is much larger than I would have guessed and own restaurants such as Chili’s and the Macaroni Grill among others. They operate 1,500 locations all over the world, several which one would be hard pressed to think of. They are generously priced at $15.53, have a MC of $1.59 billion, and a P/E of only 13.78. They have a nice growing dividend yield of 3.5% and are the second largest restaurant pick on this list to Darden who will be mentioned later. They had a good 2007 but other than that their EPS has been around $1.45 since 2005. Their most recent quarter did not live up to 2009 and their second quarter is not supposed to either, but they do currently hold a buy rating with a price target 33% above their current price, take that and the 3.5% dividend and you’ve got something. ۩۩

Fast Food Burger Restaurants

Sonic Corp SONC – We now turn to the third side of the Monopoly board and a new sub-category with Kentucky Avenue/Sonic Corp, the happy hour smoothie, overpriced drive-in. Sonic is trading at $8.08, with a MC of 0.498 billion, and a P/E of 14.85. Sonic now has 3,500 locations in America and I assume this number is growing since my home town has been blessed with its presence within the last year and this area is normally one the first to be franchised. The first quarter of this year they lost money and this took their share price down from a high of $13 and their 2009 was the worse year of the last several. It has a hold rating and a price target of $10 and should probably be avoided until they rethink their same store sales approach; I say this because the first several months this store was open in my area it was almost always at max capacity but it’s been a year and no one goes there anymore. ۩

Jack In The Box Inc JACK – Indiana Avenue is occupied by the 2,200 location Jack In The Box. They are worth double Sonic, have a price of $19.12, a MC of $1.05 billion, and a P/E of 10.72. Their growth has been much better as well, having essentially doubled their EPS from 2005 to 2009. The bad news is 2010 and its poor earnings, probably brought on by the onset of competition rather than recession since they have not experienced a dip until now. This has rendered JACK a mere hold for now, possibly a sell in my mind unless they can right the ship. ۩۩

Wendy’s/Arby’s Group Inc WEN – A stock I know all to well holds Illinois Avenue and that would be Wendy’s/Arby’s, WEN from here for simplicity’s sake. WEN has the highest P/E on this list at 150.74 (this is not a typo), a market cap of $1.75 billion, and a slightly inflated price of $4.07 on buyout rumors. WEN has a system of about 6,500 restaurants and taking Arby’s on has sunk Wendy’s. Their food is second rate by comparison and all that Wendy’s had going for it was its dollar menu and Frosties (Frosti??). That was 5 years ago, now all fast food places have Frosty equivalents and dollar menus. In addition, Arby’s is very overpriced in everything they offer and their food which was originally marketed as healthy (Market Fresh Sandwich) can compete with almost any fast food offering in a high calorie contest. Earnings-wise there is not much to talk about, but I must disclose that I am long WEN at around $3.25 and should have gotten out at $5.50. I can only hope that the $8 takeover rumors come true someday; oh, they pay a 1.4% dividend as well. Also, I have been using price targets from Yahoo and they have $24 which is just laughable, I know that this is based on analysts who have stopped following the stock years ago, a Bloomberg terminal would show a 1-year target between $5 and $5.50. I am sorry for my ranting. In Monopoly this would be mortgaged.

Burger King Holdings Inc BKC – We now move onto the part of the board where any sensible Monopoly player would have to seriously consider their purchases because of the cost. This generally starts in the yellows, though some may reserve it for just the last leg. In this analogy Burger King and their clever marketing scheme, minus all the Twlight stuff, sits on Atlantic Avenue. They are currently priced at $17.22, have a MC of $2.34 billion, and a P/E of 12.02. The biggest issue here is growth prospects. They have roughly 12,000 stores globally and their earnings have been going up since going public in 2006. But at this point who hasn’t heard of Burger King, they’re everywhere, so they are left with having to improve price margins or really amping it up overseas. The King currently has a hold rating, a price target equal to their 52 week high, and pays a 1.4% dividend. ۩۩۩۩

Fast Food/Restaurant Hybrids

Panera Bread Co PNRA – The next two companies to round out the yellows beginning with Panera Bread in the Ventnor Avenue spot have been classified as hybrids because they do not fit into the traditional restaurants category and they are certainly not fast food based on their prices. They have also become cool to hold, and by cool I mean profitable. Panera is trading at $75.43, has a MC of $2.41 billion, and a P/E of 24.89, which is a bit high, but so is the next one. They have a very strong 5 year growth rate, but this has happened mostly since 2007. Panera does its best in the fourth quarter, im guessing in part because of the cold weather and consumers having time off. Who doesn’t like celebrating Halloween with one of those bread soup things? Regardless, a monster of a second quarter is predicted with a strong third to follow and in a week and a half we’ll see if this holds true. It is this that accounts for the inflated P/E. The groupthink has a buy rating and a $94 price target. It should also be noted that this stock is set to open Monday in the $78 range. ۩۩۩

Chipotle Mexican Grill Inc CMG – I recently wrote about Chipotle, which in this article represents Marvin Gardens. They had just opened their 1000th store and were starting to voyage overseas. They are priced at $136.82, MC of $4.3 billion, and P/E 31.4. An interesting thing with them is that they do not franchise, this leads to stricter locale selectivity, which of course is a good thing. I also said that stocks that run up this high, this fast may be in for a rude awakening. But I added that Chipotle is set to report two massive quarters which will bring down their P/E and reassure their absurdly high price. Since 2005 Chipotle has grown roughly seven to eight times in EPS and this is probably an unsustainable rate at this point, but hey, I’d be happy with half of that. Of course, they have a buy rating and a price target of $155, which is there 52 week high; I’d expect that to rise sometime next quarter when they confirm their third quarter guidance. ۩۩۩

Darden Restaurants Inc DRI – As we move to the last stage of the board we will circle back momentarily to the traditional restaurant sub-category. Based on Darden’s strengh they really deserved to be in the Pacific Avenue spot, and because of the fact that their group includes the Olive Garden, Long Horn Steak House, and Red Lobster. They are relatively cheap right now at $39.76, have a MC of $5.57 billion, and a low P/E of 14. They also pay a good dividend yield of 3.1% but be wary because it was lowered in 2007 at the precipice of the recession. They have had steady, albeit slight, EPS growth since 2006. Another notion of caution: their EPS is cyclical and they do not do well in the second half of the year. This doesn’t seem to affect their stock price generally but could present some entry points based on poor headlines. They have a buy rating and a $50 price target. ۩۩۩

Coffee Joints

Tim Horton’s Inc THI – Coffee needed to be included in this project and we have one Canadian and one American. North Carolina Avenue is being held by Tim Horton’s who has a price of $33, a MC of $5.57 billion, and a P/E of 19.87. Their growth rate has been adequate since going public in 2006 and so far 2010 is looking pretty good. They’ve also just started paying a dividend, currently at 1.4%. Not many analysts follow this stock but the three most recent have buys and a price target of $39. Their biggest threat is the new McCafe, and the prospect of other fast food places doing the same thing, but for the near term coffee appears to be safe. ۩

Starbucks Corp SBUX – Second in the coffee category is Starbucks, sitting on Pennsylvania Avenue. An example of a company who grew too big too fast, they saw their highs in 2007 but have comeback admirably since. They are currently priced at $25.35, have a MC of $18.89 billion, and a P/E of 25.3. Their market cap makes them second to McDonald’s in overall size. A solid entry point may be long gone at this point; their low was around $7 in 2009 and their price target is only at $29. Like Tim Horton’s they pay a dividend in the area of 1.5%. Their next two quarters are supposed to be better than last year’s but the bulk of their money is earned in the fourth quarter so we’ll have to wait for that. ۩۩

The Behemots

Yum! Brands Inc YUM – Games of Monopoly are won or lost on the ownership of Park Place and Boardwalk. I have given Yum! Park Place because even though their MC is just below Starbucks ($18.73 billion) their P/E is lower (17.75) and their growth prospects are much stronger. They are currently priced at $40.07, which is probably pretty fair, but for the future earnings this is a steal. Their earnings have been rising progressively since 2005, up about 70% since then. In that time their dividend has quadrupled and is now sitting at 2%. Domestically there is still room for growth of restaurants like Taco Bell and overseas KFC and Pizza Hut are continuing to blossom and hitting the Chinese market. Their price target is only at $46 right now, but their 2010 earnings are supposed to exceed 2009 by 10%. This may be a longer term play, with a big payoff in the end. ۩۩۩

McDonald’s Corp MCD – I’ve saved the best for last, as is the case with most lists, and here we have McDonald’s, the Boardwalk of the restaurant world. A bluechip like none other, and the only company on this list that is listed on the Dow. And paying a 3.1% dividend right now, why would you not own this stock. Its current price is at $69.94, a P/E of 16.49, and with a MC of $75 billion, they are bigger than every other company on this list combined. There’s really not much that needs to be said here; awesome earnings growth that is expected to continue, a price target of $77, and they can handle lawsuits (Shrek glasses, Happy Meal toys) without much of a problem. The only issue is that eventually there will be no more room for additional McDonald’s. To fight this they start redoing the seating areas of current stores, offer improved menus, McCafe, and now smoothies to fight the Jamba Juices of the world. This is one of the best companies in the world and everyone knows it. ۩۩۩۩

Wrap Up

Looking at an entire industry really allows an investor to A, decide if they want to be in it, and B, make their picks based on their investment strategy. Say you like the restaurant industry as a whole; you make the defensive play on McDonald’s at the right time, maybe pick up Yum! for the long term growth, and then make a few speculation plays like Panera or Chipotle. There’s more than enough safe picks presented here, some of which could surprise, like Cracker Barrel or Brinker. To finish the analogy I have included the following companies as railroad suggestions without the write ups and two commodities to fill the utilities spaces.

Reading Railroad – Dr. Pepper Snapple DPS

Pennsylvania Railroad – Kraft Foods KFT

B & O Railroad – PepsiCo PEP

Short Line – Coca Cola KO

Electric Company – Live Cattle Futures

Water Works – Cheese Futures

If you’ve read this far I applaud you. Any comments are welcomed and I must disclose that I am currently long WEN and MCD but have not held any positions in any of the other listed companies.